Policy group lauds Duterte signing of tax reform law including coal

MANILA, 19 December 2017 -- A policy group lauded President Rodrigo Duterte for signing into law today the Tax Reform for Acceleration and Inclusion (TRAIN) bill, which includes excise and value added taxes on imported coal from Indonesia and Australia.

The Philippines imports 75% of its coal supply, 70% of which comes from Indonesia and 15% from Australia, while most of the 25% domestic coal comes from the Consunji-led Semirara Mining and Power Corporation [1].

“The historic coal tax hike is a courageous start even if the playing field remains biased towards expensive, polluting, subsidized coal. We intend to work harder to ensure real competition prevails in the power sector,” said Red Constantino, executive director of the Institute for Climate and Sustainable Cities.

“Signing into law the excise tax increase on coal is an act of leadership by the Duterte government, despite efforts by the House to dilute the administration's intention to transition to a more efficient, clean energy-powered modern economy,” he added.

The tax reform measure, now Republic Act No. 10963, raises the excise tax on coal from its current rate of ten pesos (PHP 10 or USD 0.20) per metric ton to PHP 50 up to PHP 150 per metric ton over the next three years.

The Senate version of TRAIN, included a repeal of the 12% value added tax (VAT) exemption for both local and imported coal. However, the VAT repeal for local coal was suddenly removed in the bicam-approved version.

The P10 coal excise tax rate has remained unchanged since 1988, while the local industry has been exempted from paying excise tax since 1976, according to government data, according to a briefer from the Senate ways and means committee.

According to Constantino, the coal tax increase sends the right signals to the investment community. The deflationary nature of renewable energy coupled with competition and increasingly attractive fossil gas prices will further degrade the fortunes of expensive, polluting coal in the Philippines.

“Regulatory agencies and the banking and finance communities are now on notice. The stranding of at least a trillion pesos worth of new build coal plant assets is imminent, and the coal tax will only accelerate this trend. Coal today has become the costly, unreliable, marginal alternative while clean energy has become the mainstream investment option,” he said.

Notes to the editor

The Institute for Climate and Sustainable Cities is a Philippine-based policy group working on climate and energy policies for climate vulnerable countries.